Funding Status of U.S. Pensions Increases to 88.1 Percent in March, According to BNY Mellon Asset Management

Best Status Since October 2008

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Apr 05, 2010, 12:49 ET

BOSTON, April 5 /PRNewswire-FirstCall/ -- A strong March rally in U.S. and international stocks drove the value of U.S. corporate pension plan assets higher, resulting in the best funding status for the typical U.S. corporate pension plan since October 2008, according to monthly statistics published by BNY Mellon Asset Management. The funding status in March rose 2.8 percentage points to 88.1 percent.

Assets for the typical U.S. corporate pension plan increased 3.7 percent, outpacing the 0.5 percent gain in liabilities for the month, as reported by the BNY Mellon Pension Summary Report for March 2010. The modest increase in liabilities was due to interest accrual, as the Aa corporate discount rate remained unchanged at 5.96 percent.

"On the asset side, March was even better than February as pension plans benefited from a powerful performance from U.S. stocks, particularly small caps," said Peter Austin, executive director of BNY Mellon Pension Services, the pension services arm of BNY Mellon Asset Management. "While the interest rates affecting liabilities were unchanged in March, we did see a narrowing of spreads for the Aa corporate bonds as long U.S. Treasury yields increased to their highest level since October 2008."

Plan liabilities are calculated using the yields of long-term investment grade corporate bonds. Higher yields on these bonds result in lower liabilities.

"Plan sponsors have been expressing more interest in establishing pension funding objectives that incorporate specific targets, which can be aligned with regulatory or market-based valuation techniques," said Austin. "The implementation of liability driven investing (LDI) strategies that incorporate date-specific funding targets will become more popular as plan sponsors understand the opportunities available to improve plan funding while managing downside risk."

Notes to Editors:

BNY Mellon Asset Management is the umbrella organization for BNY Mellon's affiliated investment management firms and global distribution companies.

BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.3 trillion in assets under custody and administration, $1.1 trillion in assets under management, services $12.0 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. Additional information is available at www.bnymellon.com.

All information source BNY Mellon Asset Management as at December 31, 2009. This press release is qualified for issuance in the US only and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Asset Management to members of the financial press and media and the information contained herein should not be construed as investment advice. Past performance is not a guide to future performance.

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